Correlation Between HUMANA and High-yield Municipal

Can any of the company-specific risk be diversified away by investing in both HUMANA and High-yield Municipal at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining HUMANA and High-yield Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HUMANA INC and High Yield Municipal Fund, you can compare the effects of market volatilities on HUMANA and High-yield Municipal and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in HUMANA with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUMANA and High-yield Municipal.

Diversification Opportunities for HUMANA and High-yield Municipal

0.72

Correlation Coefficient

HUMANA  High-yield Municipal

Poor diversification

The 3 months correlation between HUMANA and High-yield is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding HUMANA INC and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and HUMANA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on HUMANA INC are associated (or correlated) with High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of HUMANA i.e., HUMANA and High-yield Municipal go up and down completely randomly.

Pair Corralation between HUMANA and High-yield Municipal

Assuming the 90 days trading horizon HUMANA INC is expected to under-perform the High-yield Municipal. In addition to that, HUMANA is 2.94 times more volatile than High Yield Municipal Fund. It trades about -0.07 of its total potential returns per unit of risk. High Yield Municipal Fund is currently generating about -0.03 per unit of volatility. If you would invest  897.00  in High Yield Municipal Fund on November 28, 2024 and sell it today you would lose (5.00) from holding High Yield Municipal Fund or give up 0.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

HUMANA INC  vs.  High Yield Municipal Fund

HUMANA INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

High Yield Municipal

Risk-Adjusted Performance

Very Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High-yield Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HUMANA and High-yield Municipal

The main advantage of trading using opposite HUMANA and High-yield Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUMANA position performs unexpectedly, High-yield Municipal can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in High-yield Municipal will offset losses from the drop in High-yield Municipal's long position.

The idea behind HUMANA INC and High Yield Municipal Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.